Google News

Feasting on Fast Food: What makes India's QSR market tick

Must Read

India’s Quick Service Restaurants (QSR) market, estimated to be at Rs 8,500 crore currently, is growing at a compounded annual growth rate (CAGR) of 25 per cent. The QSR sector in India is likely to grow three-fold to Rs 25,000 crore within five years
QSRs – both Indian and international – have grown over the years, thanks to their focus on affordable and competitive pricing clubbed with catering to such growing consumer need as convenience, increased appetite, and craving for international food.
The QSR format took off in India about 19 years ago with the arrival of McDonald’s in 1996. Many global brands followed suit since then, either through company-owned stores or the franchisee model or a mix of both.
A number of international QSR chains have since flocked to India, with specific cuisines and product offerings, fuelling the market’s growth.
So, what are the challenges that the QSR market faces in a complex nation like India? Indiaretailing Bureau spoke to Principal Founder, White Unicorn Ventures, Rohit Chokhani, who gave us an insight into the challenges, and trends in the Indian market, while explaining the investment pattern. Excerpts from the interview:
How do QSRs in India manage the cost-quality equation?
Centralised procurement, inventory and stock management can drive quality centralised purchase and also keep the quality standard across the outlets. Major costs include pilferage and wastage, which can be taken by standard cooking instructions and complete automisation of inventory-in and billing. Quality inspection and checks go a long way to retain consumers. The primary reason western chains have been successful is due to standardization of their supply chain.
What are the factors leading to the healthy growth of QSRs in India?
There has been a rise in number of Indian QSR due to many factors like:
– Environment – the access to capital to innovative and enterprising companies has become easier than it was a few years ago,
– Demand – changing demographics, increase in income, urbanisation, growth in organised retail and demand for hygienic food and lastly,
– Supply – the Government has improved infrastructure and private investment in cold chain networks across the country and that has made access to quality raw material a reality.
What are the challenges foreign food brands face in a market like India?
While this has a positive economic impact and gives consumer more choice, it significantly increases competition and puts more pressure on the performance of established brands. Following a tried and tested model is no longer a guarantee for success in the franchising sector. Convenience and innovation in technology is increasingly becoming important to customers. Consumers now want the option of ordering meals online and getting them delivered to their homes. Moreover, there is an emerging focus on well-being, with consumers opting for healthier food options and preferring to patronise businesses with ethical and sustainable business practices. The Indian hospitality industry is highly labour-intensive, but the availability of trained chefs, managerial staff and other support staff is low.
How do foreign players manage the strong preference for Indian flavours and styles?
Many chains have entered India in different categories from Pizza’s, Burgers, Desserts, Sandwiches etc, most have them who have succeded are the ones which have Indianised their menu for consumers palate. Alternation of menu is not the only thing that chains have done to succeed in India, but most importantly it is alternation of the menu at the right price. See the McAloo Tikki, its one of the greatest examples how Indianised version of a burger soon became the top selling item for McDonalds.
Do Indian QSRs like Haldiram’s have a leverage over international brands? If yes, what?
Yes, Haldiram’s does have leverage over international brands like Dominos and McDonald’s put together. It is now twice the size of Hindustan Unilever’s packaged food division or Nestle Maggi and larger than the India turnover of the two American fast food rivals Domino’s and McDonald’s put together. Haldiram Manufacturing, which looks at North India, clocked Rs 2,100 crore in revenues. Haldiram Foods, catering to West and South India, had annual sales of Rs 1,225 crore. And Haldiram Bhujiawala, which does business in East India, earned revenues of Rs 210 crore. Haldiram’s, the Indian home grown brand which started the trend of snacks and street food in an organised segment has a revenue of Rs 3,500 crore, much more than the combined revenue of Domino’s (Rs 1,733 crore) and McDonald’s (Rs 1,390 crore).
Tell us about the growth of the café culture in India? 
The café culture is growing steadily in India. There is a growing young, well-traveled, section of Indian consumers that are seen following the international culture of a morning coffee and driving to work with a travel cup of coffee. Domestic and international brands offer coffee or tea with sandwiches, cookies, and muffins for on-the-go consumers. Tea lounges have followed this trend and now offer a variety of teas with food items. It is now common for business meetings to take place at coffee shops and tea lounges, as well. Major international brands like Starbucks and The Coffee Bean & Tea Leaf compete with domestic brands like Café Coffee Day and Barista. McDonald’s also entered into cafés by launching the McCafé brand in India and is expanding the number of its outlets. Unlike other CCD or Starbucks outlets, McCafe is not a stand-alone one. It exists within the McDonald’s outlet itself. The idea is to serve as an extension to the core McDonald’s offering, with consumers having the option to enjoy an assortment of food and beverages at one place. McCafe does not want an identity of its own.
What kind of challenge are Indian brands like Chaayos and Burger Singh posing to established foreign players?
A foreign brand has an easy first quarter of operations because of the hype around them being ‘international’ – so high volumes, along with high marketing spend make it a virtuous circle rather than the local QSR who has to deploy various marketing strategies to pull in the volumes in the same quarter. Although in the case of Burger Singh, being in its home market there is a strong preference for Indian flavours and cooking styles. The interest in international dishes is on the rise but most Indian consumers continue to prefer Indian-style dishes. Chaayos have put it in a contemporary setting that appeals to today’s customers. Indian QSRs are bound to grow as they are serving products that the customer loves and has grown up on. There is also a better understanding of scalability, and understanding that there is a greater financial reward in volumterics vis-a-vis the glamour of running a high-end full fledged restaurant.
Food-tech startups – a passing trend or here to stay?
Food in India is complex as it is very regionalised, because of differing taste buds. Food-tech startups have largely not done well in terms of profitability. What is important to note that many of the hyper-local delivery food-tech startups have now been an integral part of many QSR’s. A typical QSR is doing nearly 30 per cent to as much as 60 per cent business because of delivery based apps. Many QSR’s have also outsourced their entire delivery feature to delivery based on demand applications, this portrays that the dependency of the urban QSR is rising on delivery based apps, so they are definitely here to stay. Like all startups we will find 2/3 major players surviving in this business. Then we have the category of technology enabled food companies which operate on delivery model basis only. The demand for these services has seen a rise, although it remains to be seen of consumer repeat rate, as the urban Indian consumer spends nearly one third of their earning on food, therefore they are taste and price sensitive equally.
The second half of 2016 saw the investment market drying up – what can we expect in 2017? 
We will see investments in traditional food business’, packaged food business’, Indian Snacks Business’ grow in 2017, as the demand is growing for these business. We might see one or two big bang investments of foreign chains coming in, but India is a complex price sensitive market with urban cities posing high rental rates, so new chains are being cautious in their approach. In food tech we will see consolidation, and investors will chase those companies who have loyal consumers and proven business model, as these two will derive profits for these companies in the near future.

Latest News

Being Human Clothing receives 5 awards at IFF 2024

The event also awarded brands such as Rare Rabbit, Tommy Hilfiger Vero Moda, Mini Klub and United Colors of...

Login to your account below

Fill the forms bellow to register

Retrieve your password

Please enter your username or email address to reset your password.